Despite Mexico being the world’s 11th largest economy and its 15th largest exporter, a vast majority of Mexican sole proprietors and small and medium-sized businesses (SMBs) are still unbanked or underbanked. Oyster Financial (oyster.io), a fintech startup co-founded and led by CEO Vilash Poovala — who co-founded Clip (formerly PayClip), a late-stage B2B electronic payments startup that’s on a fast track to become Mexico’s first unicorn — aims to change that stark reality for small to medium-sized businesses, startups and individual entrepreneurs.
Today, Oyster Financial — a neobank that has developed its own core banking technology platform — announced it has raised US$14 million in seed funding, the largest venture capital seed round in Latin America to date — per LAVCA, led by monashees in Brazil and SV Latam Capital in San Francisco. Other investors participating in the seed round include FJ Labs, Fintech Collective, Kevin Efrusy, Redpoint eventures, S7 Ventures and Ulu Ventures. The new funding will be used to accelerate Oyster’s growth in Mexico, and make it fast and seamless for sole proprietors and small and medium-sized business owners to access financial services.
Traditional banks in Mexico have not focused on small business accounts and financial services in the past, which has created a barrier for entrepreneurism and jobs creation in the country. And, new jobs are badly needed. Last year, Mexico created the fewest jobs since the financial crisis caused by the Great Recession, and it’s now impacted by the COVID-19 crisis. More than half of Mexico’s GDP is generated by small and medium-sized businesses.
Recently, new laws have been introduced to address the widespread lack of financial inclusion in Mexico, including Mexico’s landmark FinTech Law enacted in March 2018 that paved the way for open banking in Latin America this year and helped spur a surge in fintech startups after it passed. At the end of 2016, Mexico enacted a much faster way for individuals to start their own companies via a new business entity for corporations called a Simple Stock Corporation or SAS.
“The arrival of this new incorporation type called SAS was a huge opportunity for us because Mexico’s banking system was not prepared to handle on-boarding them into the financial system,” said Vilash Poovala, co-founder and CEO of Oyster Financial. “We can open business banking accounts for all corporation types and do that for customers in 24-72 hours instead of waiting the typical 4-6 months, or even longer, to do so. And, with the current pandemic, who wants to spend hours in line at a physical bank instead of signing up with us online so quickly.”
In addition to fast access to setting up business accounts within three days, Oyster Financial provides debit cards for its customers, which can take more than a year or more to attain as a small business in Mexico. Oyster Financial’s own high-quality customer support is available 24/7 and it does not charge customers a fee for bank transfers that typically cost 3-4 pesos each.
“Oyster is solving a key pain point and delivering something that’s entirely new to Mexico: a fast track for entrepreneurs and small business owners to generate revenues and new jobs that the country’s archaic banking system simply does not address today,” said Consuelo Valverde, founder and managing partner at SV Latam Capital. “Oyster has the most experienced fintech team in Mexico, with a strong track record in startups and global tech companies, including Visa, PayPal, Clip, and Naspers/PayU. I met Vilash when he co-founded Clip, the first investment from our Fund 1. When he called me to share his vision about Oyster, it was a no brainer writing the first check.”
“Latin America represents a huge growth opportunity for fintech entrepreneurs to introduce new technologies that traditional financial institutions in Mexico and beyond have not been able to keep pace with despite increasing demands for innovation,” said Marcelo Lima, partner at monashees. “The Oyster team has a strong vision, deep tech expertise and quite a head start, as the only neobank for SMBs with its own robust BaaS platform, to deliver an outstanding experience for their customers within Mexico.”
“Our vision is to be long-time partners to our small business customers. First, with fast, easy access to B2B financial services at a fair cost, and then through the creation and rollout of innovative services that drive more stickiness by helping small business owners maintain the health and wellness of their companies and provide them with ingenious new products that integrate with Oyster’s core offerings and drive growth for their bottom lines,” said Poovala.